n IMIESA - Borrowing explained : fast lane




Extracted from text ... 56 - IMIESA SEPTEMBER 2006 My late professor once said "there is a theoretical explanation to every phenomenon". This prompted me to investigate why municipalities borrow funds. Some theoretical justifications can be found in three theories: public choice, pluralism and Marxism, which expand on the issue of municipal debt. Public choice theory of municipal debt The public choice theory is a branch of economics that developed from the study of taxation and public spending. Economists who study behaviour in the private marketplace assume that people are motivated mainly by self-interest. Public choice economists make the same assumption, that is, ..


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